Institutional Capital's Blockchain Rule Competition: How 5 Major Protocols Are Reshaping Trillions of Dollars in Asset Migration

The progress of institutional-grade RWA tokenization over the past six months has been remarkable. The market size has approached $20 billion, and this is no longer hype but real institutional capital deploying through blockchain rule frameworks. Five core protocols—Rayls Labs, Ondo Finance, Centrifuge, Canton Network, and Polymesh—are interpreting blockchain rules in entirely different ways, providing differentiated infrastructure solutions for institutions.

Explosive Growth of Institutional Tokenization

From $6-8 billion at the beginning of 2024 to $19.7 billion in January 2026, the tokenized asset market is growing at an astonishing rate. Behind this are pragmatic calculations by institutional finance executives: tokenized government bonds offer an annualized return of 4-6%, while supporting 24/7 trading, providing a clear advantage over traditional markets’ T+2 settlement cycle.

Market segmentation further illustrates the situation:

• Government bonds and money market funds account for about $8-9 billion (45-50% market share)
• Private credit $2-6 billion (the fastest-growing segment, with annual yields of 8-12%)
• Tokenized public equities over $400 million (led by Ondo, rapidly expanding)

Three major factors are driving this shift: the attractiveness of yield arbitrage, the gradual improvement of regulatory frameworks (EU MiCA has been enforced in 27 countries), and the maturing infrastructure for custody and oracles. Chronicle Labs has handled over $20 billion in total locked value, and security audit firms like Halborn have provided institutional-grade certification for major protocols.

Differences in Blockchain Rules Among the Five Major Protocols

For institutions, blockchain rules are not a single standard but a customized framework tailored to specific needs. These five protocols are not competing in the same market but are offering dedicated rule systems for different institutional scenarios.

Three Paths of Privacy Rules

Rayls Labs: Bank-Grade Privacy Infrastructure

Rayls, developed by Brazilian fintech Parfin, features the Enygma privacy tech stack—an integrated privacy ecosystem combining zero-knowledge proofs, homomorphic encryption, and confidential payments. This rule system targets what banks truly need: transaction confidentiality, not the privacy concepts often imagined in DeFi.

The Enygma tech stack includes five core functions: zero-knowledge proofs to ensure transaction confidentiality, homomorphic encryption for encrypted data computation, native interoperability across public and private networks, atomic swaps and embedded payment settlement, and programmable compliance disclosure mechanisms.

Practical applications have already begun: the Central Bank of Brazil is using it for its CBDC cross-border settlement pilot, and Núclea is tokenizing regulated receivables. On January 8, 2026, Rayls completed a Halborn security audit, laying the foundation for its institutional deployment. More importantly, the AmFi alliance announced a goal of tokenizing $1 billion in assets on Rayls, with a 5 million RLS token incentive support.

Canton Network: Wall Street-Grade Privacy Design

Canton employs Daml (Digital Asset Modeling Language) to implement privacy at the smart contract layer, with rule logic fully aligned with Wall Street trading practices. The contracts specify data visibility: regulators see full audit records, counterparties view transaction details, while competitors and the public remain unaware.

This rule system is backed by top-tier institutions like DTCC (Depository Trust & Clearing Corporation), BlackRock, Goldman Sachs, and Citadel Securities. DTCC and Euroclear serve as co-chairs of the Canton Foundation, representing not just participation but direct control over governance. On January 8, 2026, Temple Digital launched a central limit order book with sub-second matching speed on Canton, supporting non-custodial trading.

Canton aims to handle the $3.7 quadrillion annual settlement volume processed by DTCC in 2024. With SEC No-Action Letter approval, some US government bonds held in DTCC custody can be tokenized natively on Canton. The MVP is scheduled for launch in the first half of 2026.

Polymesh: Protocol-Level Compliance Rules

Polymesh takes a completely different approach—embedding compliance rules into the protocol consensus layer rather than relying on complex smart contract code. This means identity verification at the protocol level, embedded transfer rules, and atomic finality settlement in 6 seconds.

Non-compliant transactions are rejected at the consensus stage without the need for custom audits. Ecosystem partners like Republic and AlphaPoint support over 150 trading venues across 35 countries. A bridge to Ethereum is planned for Q2 2026 to break the current isolation of being a standalone chain.

Market Positioning and Competitive Logic of the Protocols

Ondo Finance’s Retail Expansion Strategy

Ondo started focusing on government bonds and has become the largest platform for tokenized stocks. As of January 2026, its TVL reached $1.93 billion, with tokenized stocks over $400 million (market share 53%).

Ondo’s holdings on Solana’s USDY are about $176 million. On January 8, 2026, it launched 98 new tokenized assets covering AI, electric vehicles, and thematic investments. Its multi-chain deployment strategy is clear: Ethereum for DeFi liquidity, BNB Chain for native exchange users, and Solana to support large-scale consumer use.

Notably, despite a decline in token prices, Ondo’s TVL reached $1.93 billion, reflecting genuine institutional demand rather than speculation. Compared to Backed Finance, with an asset size of only $16.2 million, Ondo’s lead is even more evident.

Centrifuge’s Institutional Credit Depth

Centrifuge has become the standard infrastructure for institutional private credit tokenization, with TVL soaring to $1.3-1.45 billion. Unlike competitors that simply package off-chain products, Centrifuge directly tokenizes credit strategies during issuance.

Its partnership with Janus Henderson demonstrates its institutional strength: a global asset management firm managing $373 billion has issued AAA-rated secured loan securities (CLO) via Centrifuge, using the same investment team as its $21.4 billion AAACLO ETF. Additionally, Grove Capital committed $1 billion in capital allocation, with an initial $50 million in capital, from top institutions like Deloitte, Citigroup, and Block Tower Capital.

The collaboration with Chronicle Labs announced on January 8, 2026, addresses oracle issues—providing cryptographically verified holdings data to support transparent NAV calculations, custody verification, and compliance reporting.

Unresolved Issues and Market Barriers

Despite rapid growth, institutional-grade tokenization still faces four major challenges:

Cross-Chain Liquidity Fragmentation is the core issue. The annual cost of cross-chain fragmentation is estimated at $1.3-1.5 billion, with arbitrage spreads of 1-3% for the same asset across different blockchains. If unresolved by 2030, annual costs could exceed $75 billion—completely offsetting the efficiency gains from tokenization.

The contradiction between privacy and transparency cannot be perfectly resolved. Institutions require transaction confidentiality, regulators demand auditability, and in multi-party scenarios, each party needs different levels of visibility. No perfect solution exists yet.

Regulatory fragmentation incurs high costs. EU MiCA applies in 27 countries, while in the US, each case requires applying for a No-Action Letter, which takes months. Cross-border capital flows face jurisdictional conflicts.

Oracle risks still exist. Tokenized assets depend on off-chain data sources; if data providers are attacked, on-chain performance will reflect incorrect realities.

Four Catalysts in 2026 and the Path to Trillions

Ondo’s launch on Solana (Q1) will test whether retail-scale issuance can create sustainable liquidity. Success is indicated by over 100,000 holders.

Canton’s DTCC MVP (H1) will verify the feasibility of blockchain in US government bond settlement. If successful, trillions of dollars could shift onto blockchain infrastructure.

US CLARITY Act passage will provide a clear regulatory framework, enabling cautious institutional investors to deploy capital.

Grove deployment by Centrifuge will complete a $1 billion distribution, testing the practical capital operation of institutional credit tokens.

Based on current progress, the tokenized asset market could surpass $100 billion in 2027-2028:

• Institutional credit: $30-40 billion
• Government bonds: $30-40 billion
• Tokenized stocks: $20-30 billion
• Real estate / commodities: $10-20 billion

This requires a 50-100x increase from the current $19.7 billion. Although ambitious, considering the institutional momentum in Q4 2025 and upcoming regulatory clarity, it is not out of reach.

Future Landscape of Protocol Ecosystems

The institutional RWA landscape in early 2026 shows unexpected trends: no single winner, because there is no single market. This is the proper development direction for infrastructure.

From market segmentation, banks tend to prefer Rayls (privacy-first), retail users choose Ondo (liquidity-first), asset managers deploy Centrifuge (depth-first), Wall Street infrastructure migrates to Canton, and securities issuers adopt Polymesh (compliance-first).

Institutions are not seeking the “best blockchain,” but rather infrastructure that solves their specific compliance, operational, and competitive needs. The growth from $8.5 billion in early 2024 to $19.7 billion in 2026 clearly shows that demand exceeds speculation.

The key is that execution takes precedence over architecture, and results over blueprints. Over the next 18 months, the infrastructure choices of these five protocols will define the industry landscape for the next decade. Traditional finance is heading toward a long-term on-chain migration, and the blockchain rule systems chosen by institutional capital will determine whether tokenization is an efficiency improvement within existing structures or a complete overhaul replacing traditional financial intermediaries.